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Cashback credit cards aren’t for everyone — some cardholders may find incredible value in these cards, while others may find them too costly. Consider what’s important to you; If you often travel abroad, look for travel cards with no foreign transaction fees. But if you want to earn rewards on everyday purchases, such as groceries, gas, dining or online purchases, a cashback credit card may be the one you need.
But that’s not the only cool perk that comes with cashback credit cards: Often, you’ll get a long intro APR period on balance transfers, on purchases or both, and you likely won’t pay an annual fee.
How do I know if it’s worth getting a cashback credit card?
To find out whether cashback credit cards are the right choice for you, consider the following card features:
Do you want cash back?
Cashback credit cards are an excellent option if you want to earn rewards on groceries, gas, dining, entertainment or at select retailers. Depending on the card you choose, you can get flat cash back on all purchases of between 1% and 2.5%, or you can get up to 6% cash back at US supermarkets.
There’s another type of cashback card that offers 5% back on categories that rotate each quarter. But there are also cards that offer 5% cash back throughout the year on purchases made at select retailers, such as Amazon or Target.
Do you care about a signup bonus?
Most cashback credit cards with no annual fee offer a signup bonus between $50 and $150. If you apply for a targeted offer, you could earn a $200 signup bonus. Cash back cards that come with an annual fee offer a slightly higher signup bonus between $200 and $250.
Do you want a no-annual-fee card?
Most cashback credit cards have no annual fee. Of course, there are cashback cards with an annual fee, but these are rare and if you combine several no-annual-fee cards you can potentially get a more rewarding combo.
Do you need a 0% intro APR period?
Almost all cashback credit cards offer a long 0% intro APR period on purchases, balance transfers or both. This can help you make large purchases and pay them off in up to a year and a half, or move your debt from another card and pay it off without interest.
If you’re looking for a cashback card with ongoing low-interest rates, consider applying for a card issued by a credit union. The only downside, in this case, is that you may not be eligible to apply.
What are the pros and cons of cashback credit cards?
Cashback credit cards can be an excellent financial tool, but there are also some drawbacks you need to consider.
High rewards rate. Earn 6% cash back when you use some credit card on select categories, such as purchases made at US supermarkets or US streaming services. You can also find a lot of cashback cards with 5% back on rotating categories.
Variety of cashback categories. Earn accelerated rewards on almost every category of purchases, including groceries, gas, dining, online purchases and streaming services.
Simple rewards structure. Enjoy a simple rewards structure that doesn’t require you to calculate how many points each redemption option requires; You always know how much you get from your purchases.
Signup bonus. Earn a decent signup bonus with most cashback cards once you meet certain spend requirements. Depending on the card, the bonus can be up to $300.
Intro APR period. Get a long intro APR period on balance transfers, on purchases or both with most cashback cards.
No annual fee. Pay a $0 annual fee for most cashback credit cards. Of course, there are exceptions, but it’s unlikely that you’ll find a cashback card with a higher annual fee than $99.
High APR. Watch out for high APR that applies after your intro APR period ends. To make the most of your card’s rewards, pay your balance in full before it’s due.
Foreign transaction fee. Pay foreign transaction fees between 1% and 3% on all purchases made abroad or online with foreign merchants. This makes cashback cards poor international traveling companions.
Cashback limitations. Watch out for cashback caps as some cashback cards that offer high reward rates limit the amount of cash back you can earn. For example, you can earn 5% cash back on select categories on up to $2,500 in a quarter. After that, your rate reverts to 1%.
When shouldn’t you get a cashback credit card
In some situations, cashback credit cards may not be the most prudent choice. To find out whether a cashback card would be a poor choice for your situation, ask yourself:
Do you often travel abroad?
If you do, a cashback card won’t help much. Actually, it may cost you extra to use abroad. That’s because most cashback credit cards have foreign transaction fees of up to 3% of the amount of every transaction. This means a $5,000 spend abroad will cost you an additional $150 in fees. In that case, getting a travel card would be a better choice.
Do you often travel?
Even if you don’t mind paying foreign transaction fees, you’ll likely earn only 1% to 2% cash back on your travel purchases. But with a solid travel card, you can earn up to 5x points on travel purchases, and you can redeem your rewards for airfare, hotel stays, car rentals or cruises. What’s more, you may get additional perks like free checked bags, airport lounge access, TSA PreCheck or Global Entry fee credit and more.
Do you want to pay off existing debt?
In this case, a card with a long 0% intro APR period on balance transfers would be the best choice. There are cashback cards that offer long 0% intro APR period, but the cards with the longest intro APR period typically have no rewards program.
Who are cashback credit cards best for?
Cashback credit cards could be worth considering if you want to save money on interest payments with a long 0% intro APR period on purchases, balance transfers or both; or if you want to earn accelerated cash back on categories, such as:
Department store purchases
Home improvements purchases
Most credit cards let you earn accelerated cash back on multiple categories. But if you can’t pinpoint an exact category where you spend most of your money, consider a cashback credit card with unlimited cash back on all purchases. Most such cards have a flat reward rate of either 1.5% or 2%.
Compare cashback credit cards
How to maximize your rewards
Spend enough to earn the signup bonus. You may need tomake purchases more aggressivelyto reach the spending requirement by the bonus’s expiration date. The clock starts ticking the day you open your account, which may be a few days before you receive your card in the mail. If your credit limit isn’t high enough, you may have to pay off your balance a few times to make room for additional spending.
Sign up for special categories in advance. If you choose a rotating-bonus-category cashback card, you may need to activate your categories before you earn elevated rewards.
Spend more in categories that earn more rewards.If you won’t earn elevated rewards for certain purchases, consider using a different card.
Use your credit card for purchases only. Cash advances and balance transfers don’t earn rewards. In addition, they usually start accruing interest immediately.
Consider a cashback credit card if you want to get a long intro APR period on purchases or balance transfers; or if you want to earn rewards on everyday purchases. Just be sure to pay off your balance on time to avoid a high APR after the intro period ends.
If you’re not sure whether cashback cards are the right choice for you, compare rewards credit cards until you find the right type of credit card for your needs.
Frequently asked questions
Typically, you can get your cash back as a statement credit or a deposit to your eligible account. Depending on the card, you could get other redemption options such as gift cards or merchandise.
For example, Chase cashback cards are advertised as letting you earn cash back, but they actually let you earn points you can redeem for cash among many other redemption options.
It depends on the card — some cards have no redemption threshold, while others have a $25 minimum.
If the card provider reports your card activity to the three credit bureaus — Experian, Equifax and TransUnion — then yes, you can build your credit with responsible card use.
This means you earn some of the money you spent on your purchase back. For example, if you earn 5% cash back on gas and you spent $100 to fill up your tank, you would get $5 back for your purchase. This may not seem like much, but it can quickly add up.
Kliment Dukovski is a credit cards writer. He's written over 600 articles to help readers find and compare the best credit cards. Kliment has also written on money transfers, home loans and more. Previously, he ghostwrote guides and articles on foreign exchange, stock market trading and cryptocurrencies.
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